A 99-year lease in Shongweni, KwaZulu-Natal, has been announced between local development company Fundamentum Property Group and sugar producer Tongaat Hulett. 

The transaction, which has been called the Shongweni urban core transaction, will see a multi-phased development of Shongweni’s urban core – the new city of Westown – which has received strong support from the eThekwini municipality.  

This trigger phase of the Shongweni urban development will see the creation of a mixed-use precinct of urban and green spaces centred on the new retailing hub of Westown Square. This will be followed by a variety of other uses of the precinct including residential, logistics, recreational, warehousing and leisure components. 

Tongaat Hulett said it would benefit from sustained value creation over time through the transaction, boosting the company’s strategy of evolving from outright property sales to earning annuity income from its property portfolio.  

The nature of the transaction is similar to that of the Waterfall development in Midrand, Gauteng. This approach allows Tongaat Hulett to retain ownership of the land and be entitled to annuity income from the residential, commercial and mixed-use properties. 

As the landowner, Tongaat Hulett, in partnership with Fundamentum as the Westown developer, will be responsible for the Shongweni urban development’s overall development vision and framework plan that aligns with public sector policy, plans and objectives.  

This vision will extend to creating compelling and tailored real estate solutions for developers, investors, local community participants, future residents and end-users within the Shongweni urban development. 

With the conclusion of this first alternative and innovative transaction, Fundamentum will oversee and manage all aspects of the development of Westown as it is developed over multiple phases and years. 

Westown is the focus of this transaction, with current development rights for 517 000 bulk square metres. The retail offering of Westown Square will see the first phase of 45 000 m² of development rights taken up alongside a new 100-bed private hospital. This will be followed by commercial, business and residential developments within Westown. 

The key to unlocking the development of Westown is a required infrastructure investment of about R730-million over the next three years, with the eThekwini municipality committing to supporting the catalytic project with an initial R595-million. 

The 99-year lease mechanism is expected to deliver value in excess of the land value over time, while retaining the land asset itself. The commitment by eThekwini and Fundamentum for infrastructure development removes a large obligation for Tongaat Hulett, both from a cash flow and a resource point of view, the company said.  

In addition, the development of Westown is expected to yield significant benefit for the balance of the 2 000 ha Shongweni urban development and will act as a catalyst for the further development of industrial, lifestyle residential and other uses. 

“The Shongweni urban development project represents an innovative partnership between local government and the private sector. In overcoming the current challenging economic environment, the partners have produced a solution which transforms a key part of the Tongaat Hulett property portfolio into an annuity-generating asset.  

“The project will act as a catalyst to benefit the people of Shongweni for years to come,” Tongaat Hulett property development executive Mtura Matshini said.